1040 gross income

Question 1

Gross income items included

Answer 1

• compensation salary ,bonus,tips
• interest
• dividend
• alimony received
• business income & loss schedule c
• capital gain &loss
• tax refund
• medical saving account
• taxable IRA distribution
• annuities and pension
• rents ,royalties ,partnership ,s corporation ,
• unemployment compensation
• social security
• other income
• life insurance proceeds
• jury duty pay
• gambling winning
• prizes and rewards
• discharge of debts
• income in respect to decedent

Question 2

Compensation salary bonus tips

Included or not

Answer 2

Included

Question 3

Income become taxable when

Answer 3

Realized &recognized

Question 4

Death benefits include / not included

Answer 4

Included

Question 5

Cafeteria plan when it is paid in cash and when

it is qualified benefits

Answer 5

If in cash include in gross income

If qualified benefits excluded from income

Question 6

Group term insurance coverage up to 50,000

Answer 6

Premium paid by employer excluded from employee GI

Question 7

Group term insurance coverage more than 50,000

Answer 7

Premium paid by employer included in employee GI

Question 8

Insurance proceeds paid in reason of death

Answer 8

Proceeds if it is paid by lump sum or installment excluded but interest under installment method included

Question 9

Certain expenses paid by employer to employee excluded ,examples

Answer 9

• health insurance premium paid by employer to employee
• meals and lodging
• health and accident benefits

Question 10

Incentive stock option

Answer 10

Included in gross income when sold only not when granted or exercised

Question 11

Cancellation of debts

Answer 11

Included

Question 12

Interest income

Answer 12

Included

Question 13

Interest income included except

Answer 13

Interest income on municipal bond

U.S. Saving bond

Question 14

Bond discount is included or excluded

Answer 14

Included as interest income

Question 15

Bond premium is treated as

Answer 15

Offset to amount of interest income

Question 16

Conditions must met to exclude interest on U.S saving bond

Answer 16

1) The bonds must be issued after December 31, 1989, to an individual age twenty-four or older at the bond’s issue date.
(2) The purchaser of the bonds must be the sole owner of the bonds (or joint owner with his or her spouse). Married taxpayers must file a joint return to qualify for the exclusion.
(3) The redemption proceeds must be used to pay qualified higher education expenses (i.e., tuition and required fees less scholarships, fellowships, and employer-provided educational assistance) at an accredited university, college, junior college, or other institution providing postsecondary education, or at an area vocational education school.
(4) If the redemption proceeds exceed the qualified higher education expenses, only a pro rata amount of interest can be excluded.

Question 17

Occupational sickness and injury

Answer 17

Excluded from income

Question 18

Alimony received

Answer 18

Wife -payee included

Spouse -payer excluded

Question 19

Child support

Answer 19

Wife- payee excluded

Spouse- payer included

Question 20

Property dividend

Answer 20

Included

Question 21

Stock dividend

Answer 21

Excluded but if any thing from the following will included

• is on preferred stock
• is payable at election to shareholders in stock or property
• result in some common shareholder receive preferred stock and common shareholder receive common stock
• result in receipt of property by some shareholder increase in interest

Question 22

Property dividend excluded if

Answer 22

1- distribution in excess of earning and profits (excess represent return on capital)
2-received on life insurance if total dividend not exceed total premium paid
3- received from s corporation
4- receiving from mutual funds investing in tax exempted bond

Question 23

Stock split is taxable or not

Answer 23

Taxable

Question 24

Jury duty pay

Answer 24

Included by employee

Question 25

Prizes & rewards

Answer 25

Included by FMV

Question 26

Prizes and rewards excluded if

Answer 26

1- in connection to scientific , religious, artist , charitable , civic achievement 2- selected without any action to enter the consent 3- no requirement to render service in the future 4-contribute the prize to charitable contribution 5 if it is employee achievement rewards based on period of service

Question 27

Tax refund

Answer 27

If taxes paid result in benefit ----- refund included | If taxes paid not result in benefits----- refund non taxable